A new UN agreement could pave the way for multibillion-dollar plans to build a carbon capture network in the UAE.
But energy companies still have to wait to learn the exact shape of the UN carbon credit programme, including how much credit could ultimately be available.
The inclusion of carbon capture and storage (CCS) in the agreement signed on Saturday after UN negotiations in Cancun is of particular importance to Masdar, Abu Dhabi’s clean energy company. Masdar is counting on the adoption of an international incentive scheme for CCS with its plans to build a multibillion-dollar carbon-capture network in the UAE.
Keristofer Seryani, who manages commercial development for Masdar’s carbon unit, hoped the carbon credits would “provide significant financial support” for those plans.
By 2012, Masdar plans to capture 800,000 tonnes from Emirates Steel’s plant in Musaffah and transport it through a 500km pipeline to Abu Dhabi’s oilfields. By injecting the carbon into ageing fields, forcing oil out in a practice called enhanced oil recovery, the company could extend the life of the fields by up to 15 per cent as well as free up the natural gas more commonly used in such processes. Masdar had planned to award a contract for the first phase by the end of this year.
The details of the UN’s Clean Development Mechanism (CDM) need to be clarified before Masdar can decide exactly how much to grow its carbon capture network, Mr Seryani said.
“CCS projects are economically challenging and require international financing,” he said. “The inclusion of CCS as a technology in the CDM is a step in the right direction but more visibility on the crediting process and the value of the international subsidy needs to be clarified before we can make such a decision.”
The UN agreement also advances Masdar’s US$2 billion (Dh7.34bn) project with BP to build an emissions-free hydrogen-fuelled power station. Because carbon dioxide would be a by-product of sourcing the hydrogen from natural gas, those emissions could potentially contribute to Masdar’s carbon capture or enhanced oil recovery plans.
That project’s timing ultimately depends on the readiness of oilfields to accept carbon injection, Mr Seryani said. The language of the UN’s original draft agreement at the Cancun negotiations reveals wariness about unintended environmental damage and legal liability from burying carbon underground. Among the issues raised in the draft that could be discussed at the next round of talks in South Africa next year were the threat of concentrated amounts of carbon dioxide leaking from storage sites and the insurance required to cover such an event.
The document also acknowledges that CCS has not garnered full public acceptance, citing “the potential for the creation of perverse incentives for increased dependency on fossil fuels”.
Another issue for oil companies is whether the carbon that remains trapped in fields after enhanced oil recovery could count for credits in addition to carbon injected exclusively for sequestration. “Any [carbon dioxide] that’s reserved underground after the oil comes up, does that count? Or is [carbon gas] that’s used for enhanced oil recovery morally off the table for inclusion?” said Brian Freeman, a business development manager for the environmental consulting company Integrated Environmental Solutions, based in Kuwait.
“There’s still a lot of policy issues that haven’t been answered.”
Sceptre Group Limited is a specialist investment firm focused in low carbon financial investments such as sustainable biofuel plantations, agricultural farmland and green technologies.
Visit our website for more information: www.sceptreinternational.com